The SME portfolio

kdjolly · October 1, 2024, 10:19am

Compiled a short note, Enjoy,

Navigating Global Trade, Unlocking Infinite Possibilities.

01/10/2024
Listed on NSE Emerge, Lot Size 500, will change to 250 on 1st November

COMPANY OVERVIEW:
• 2 decade old Company providing Logistics and Supply Chain solutions across South America, Europe, Gulf & South East Asia. It has two wholly-owned subsidiaries i.e. SJA Logisol India Private Limited and S.J.L. Group Singapore Pte Ltd.

• Key services include:
Project Cargo,
Ocean & Air Freight Forwarding,
Customs Clearance,
Inland transportation Warehousing,
Door Delivery &
NVOCC (Non-Vessel Operating Common Carrier)

• Member of agency networks like ALN Network, America Alliance & PPL

Starting the Warehousing Operations by entering into an agreement for renting warehouse space located at Bhiwandi

S J Logistics has entrenched itself nationally, accumulating extensive industry expertise. Its proficiency extends across various sectors, including but not limited to yarns, textiles, transmission towers, tyres, polyfilms, chemicals, agro commodities, and Fast-Moving Consumer Goods (FMCG).

Orders Received:
May 09, 2024

July 16, 2024

22nd July 2024
Announcement for approval of Air Cargo license issued by International Air Transport Association (“IATA”)

The International Air Transport Association (“IATA”) has issued the License to S J Logistics (India) Limited to promote, sell and handle International Air Cargo transportation vide IATA
Code: 14027270003.

Q1 Management Commentary:
Rajen Hasmukhlal Shah, Chairman & Managing Director of S J Logistics (India) Limited,
commented on the company’s financial performance for the Q-1 of fiscal year 2025:

"We are delighted to report a robust financial performance for Q1 FY25, highlighting our
resilience and strategic foresight in a rapidly evolving logistics landscape. The exponential
increase in consolidated revenue and growth in net profit are testaments to our team’s
dedication and our strategic initiatives aimed at driving sustainable growth.

This quarter, we have seen significant improvements across our key performance metrics.
Our company has achieved consolidated revenue of Rs.100.71 Crores in Q-1 FY25 which
was Rs.270.86 Crores in full FY24, this growth reflects not only the expansion of our service
offerings but also our focus on operational efficiency and market penetration. Further, the
rise in consolidated net profit demonstrates our effective cost management and operational
discipline, enabling us to enhance shareholder value while investing in our future.

Increase in our EBITDA margin which is 14.03% in Q1 FY25, as compared to 10.87% in
FY23-24 underscore the success of our ongoing initiatives to optimize our logistics
processes and control costs. This has been possible with the increased contribution of
Project Cargo Shipments which carry higher EBITDA margins. These improvements are
crucial as we continue to navigate a complex market environment.

The increase in cargo volume and the improvement in delivery timelines are particularly
noteworthy. They are indicative of our commitment to operational excellence and our ability
to meet the evolving needs of our customers with greater efficiency and reliability.

Future Outlook:
Looking ahead, our company is optimistic about the growth opportunities in the logistics
sector. The company plans to further expand its operations and enhance its service
capabilities to meet the evolving needs of its customers and also on-boarding of new
customers. With a strong focus on sustainability and digital transformation, S J Logistics
(India) Limited aims to lead the industry in providing innovative and efficient logistics
solutions. The company is also exploring strategic partnerships and acquisitions to
strengthen its market position and drive long-term value creation. Our focus will remain on
leveraging emerging opportunities and driving innovation to deliver superior value to our
clients and stakeholders

Our team’s relentless pursuit of excellence, coupled with our strategic investments, positions
us well to capitalize on the growing demand for logistics services. We are optimistic about
the future and are committed to maintaining our momentum as we advance into the second
Quarter of the fiscal year."

12th September 2024

1. ISSUE OF 7,00,000 SHARE WARRANTS, CONVERTIBLE INTO EQUITY SHARES ON PREFERENTIAL BASIS TO THE PERSON BELONGING TO PROMOTER AND PROMOTER GROUP CATEGORY:

2. ISSUANCE OF 6,94,000 EQUITY SHARES ON PREFERENTIAL BASIS TO THE PERSONS BELONGING TO NON-PROMOTER CATEGORY:

Some Blog Posts to know more about the Company:

Daily:
Taking support @ 50DMA, Holding firm in this SME Meltdown

Weekly:
Taking support @ 10 WMA

Compiled Notes from here & there, No Buy or Sell Recommendation. Do your Own Due Diligence.

Aakash_Suresh · October 5, 2024, 6:17am

I did some research on Evans Electric and found these problems

11Cr is in UTI arbitrage fund ( significant portion of reserves in balance sheet and this will not even grow at 6% , they could have put in at least index fund )
FY23-24 around 5Cr Trade receivable with age less than 6months - highest in history I am doubtful about complete recover .
5Cr commission on sales is huge around 33% of top line ( no explaoination as to who takes this and is seen every year )
There is no successor Planning ( current promoters are in 70s)
Purchase can be made only in lots ( each lot is 500 stocks ) as its a BSE SME , low liquidity
Growth seen in the near past in not promissing further growth, it could be one off thing.

Dhvanit_Merchant17 · October 5, 2024, 12:23pm

@Aakash_Suresh, the problems specified are spot on.

I actually was invested earlier in this company and communicated with their CS with regards to the Arbitrage fund sub-par returns and since they have absolutely no need for the Investments in working capital, even FDs fetch better returns. I did get response from the CS, but looks like they still are in the same funds.

My exit was triggered by H1 FY 25 results, abnormal margins along with negative cash flows and increase in price due to the results.

Succession plan, lying funds and uneven sales trajectory makes it an optimum value trap.

Although the company comes with decades of experience and currently supported by the tailwinds in the industry.

Overall it gave me decent returns in short span of time, so I am naturally happy with the company but it should not be viewed for more than a medium term bet.

Note: currently not invested and not read AR and recent announcements.

Mahigiri21 · October 9, 2024, 1:11pm

Hello, I’m new to analysing SME stocks. One query I had, is it possible to find a company with decent management and plans to scale up and then maybe actively track and hold that for several years (lets say 5yrs) that can give good returns like 20x or 30x+. As I have seen cos. with Mcap of 200-300 reach 2000Mcap in 1-2yrs. Or was this just due to the bull run. Penny for your thoughts?

Dhvanit_Merchant17 · October 9, 2024, 3:36pm

In theory it is quite possible but you should consider the markets we are in and the valuations.

The valuations have low chances of getting more expensive than current rates (not considering results).

Also the companies who have high chances of posting remarkable growth, market is already discounting it at forward results (6 months to even 3 years)

So the window is very scarce in the SME segment at the moment. (Do note that few genuine SMEs will have some X times returns and some random operated SMEs will have unreal returns)

And be very cautious with the companies you choose in the current environment (if things went downhill, upto 80% fall can’t be ruled out)

Mahigiri21 · October 10, 2024, 11:57am

Has anyone looked at Hemant Surgical Industries? I had researched on it and looks quite interesting and attractive to me.
Stand-out Point: It is increasing localization/local manufacturing for its core product too 100% which will drive margins and tying up/operating dialysis centers and also entering in newer segments to drive growth in sales.

I would appreciate if anyone can share their views on this as valuation wise company looks attractive too. I have attacked the link of my research below
Disc: Not Invested; Tracking

@Dhvanit_Merchant17 @kdjolly @DocDhiru & others?

Madhav_Langaliya · October 10, 2024, 12:25pm

any views on ABS Marine ?

Mahigiri21 · October 14, 2024, 5:18am

Is anyone tracking these companies? Found them a bit interesting upon first look:
Enfuse Solutions Ltd.
Envirotech Systems Ltd.
GEM Enviro Management Ltd.
Harshdeep Hortico Ltd.
Osel Devices Ltd.
Par Drugs And Chemicals Ltd.
Paragon Fine And Speciality Chemical Ltd.
Quest Laboratories Ltd.
Rockingdeals Circular Economy Ltd.
Saakshi Medtech & Panels Ltd.
Systango Technologies Ltd.
Yash Optics & Lens Ltd.

vvidja · October 20, 2024, 2:57am

below 2 tracking…
Saakshi Medtech & Panels Ltd.
Systango Technologies Ltd.

anmol_satyam · October 20, 2024, 3:31am

What do you find interesting in Gem enviro?
Would love to hear the thesis.

kdjolly · October 22, 2024, 12:41pm

bharat19 · October 24, 2024, 4:09pm

Looked at their Nagpur Office photo on Google. Seems to be a office at home.
Can someone in Nagpur who can visit and see

stable_compounder · October 24, 2024, 4:25pm

The stock option scheme of 4 lakhs stocks is almost 4% of current paid up capital, which looks huge. Is this normal?

kdjolly · October 25, 2024, 12:46am

True representation of WFH

Anshul_Yadav · November 2, 2024, 9:18pm

@Dhvanit_Merchant17 Are you still tracking Cosmic CRF and Sunita tools? What is your opinion on them?

omkuvadiya · November 13, 2024, 1:25pm

@Dhvanit_Merchant17 I think the other exceptional income of Vision Infra will continue further. As they are renting the machinery for infra companies, they need to sell old/useless machinery and/or refurbish and sell them to purchase(which is in fact their another business) new one which is part of their operation. This is as per my understanding.

Md_Tauseef_Waquar · November 14, 2024, 2:25pm

@Dhvanit_Merchant17 K2 Infragen’s H1 results are out and it’s very poor. Both topline and bottomline are down YoY despite their guidance of 150% growth. What will be your next move? Exit or hold?

Dhvanit_Merchant17 · November 14, 2024, 5:33pm

I am going to wait for H2 results. Then I will take any call.

Rah20 · November 17, 2024, 7:33am

What is your view on trust fintech result?

Dhvanit_Merchant17 · November 17, 2024, 8:31am

On revenue things are kind of Ok, but many questions are raised here as to their future strategy.

Capitalisation of employees expense have slowed while allocation to P&L is huge, so was the H2 FY 24 was a mere try to make the bottomline green.
As per their investor presentation, the softwares are at a good level of completion and will be ready soon, then why the WIP has not increased significantly.
Perhaps the main problem is still the utilisation of IPO proceeds. Even if we put aside the building facility, funds are not even spent for intangible assets (software) and hardware procurement is slow (what about the quotation time limit mentioned in RHP, only mgmt can answer)

In continuation of utilisation, they were quite clear about time and purpose of allocation of funds for each customized software product and nothing seems to have progressed. That’s just plain sad. Whether they have later realised that those particular software for various geographies is useless/commercially unviable or they are delaying it or they are not capable.

With regards to the recent order wins, when will it reflect in Profit & Loss. They won many small orders from various types of banks.
Other income appears to be interest income which ultimately is from IPO unutilized amount and that has supported bottomline a lot, if we remove it, P&L looks dismal.

Presently I am holding the company because I have reduced my holdings 3 months ago and the current cost when adjusted with profits, provides significant margin of safety for me.

And I am looking forward to their transcript of the concall. (I will not be able to attend concall)

I hope they have some sensible answers else we would see a painful journey until a huge CBS order of some big Bank/NBFC or next financial results.

With regards to the present valuations, it was expensive and the result effect made it more expensive and considering the weak results of majority of companies posting results closer to the due date plus weak sentiments as compared to a few months ago, it will face a lot of pressure.